Africa and the Gulf Must Band Together to Dominate the Hydrogen Economy
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Africa and the Gulf must band together to dominate the hydrogen economy
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By Naam Chakravorty, Gulf Analyst, Botho Emerging Markets Group
August 23, 2022
Hydrogen is the new buzzword in energy. The element, which is lightweight, energy-dense, and easy to store, has the potential to revolutionize how we use energy. This is because hydrogen is the only feasible option to replace fossil fuels as the main source of energy for transportation, industry, and energy production with lower greenhouse gas emissions. In addition, hydrogen, when produced through renewable energy, will have zero carbon emissions. By 2030, the hydrogen economy may be worth $500 billion, according to current estimates.
But while the growing economy has many countries jumping at the opportunity to claim a piece of the pie, in practice, the widespread production and adoption of hydrogen are plagued with developmental challenges. Among the adopters are a few African countries that have begun to explore the idea of production and export. Africa has the potential to be one of the largest exporters of green hydrogen globally. However, the continent will need to establish strategic partnerships for financial, regulatory, and technical support if it is to fully realize its potential and emerge as a top hydrogen fuel exporter over the next decade.
Hydrogen as an energy source has taken roughly 200 years to develop as it does not exist naturally in its pure form. Instead, it must be extracted from organic material, such as biomass, fossil fuel, and water, which adds to the complexity of its production. Furthermore, because of its high diffusivity and flammability (owing to its small molecular size and low liquefaction temperature), transporting hydrogen is more expensive and challenging than transporting natural gas. Today, a number of technologies for producing hydrogen are in use, but gray, blue, and green hydrogen production processes are at the forefront. Green hydrogen, however, is the most coveted as it is produced using renewable energy sources such as solar and wind power, as well as electrolysis to split water, making it the cleanest source of hydrogen.
Africa’s Green Hydrogen Opportunity
The continent of Africa has a nearly infinite capacity for solar energy (10 TW), as well as abundant hydropower (350 GW), wind energy (110 GW), and geothermal energy sources (15 GW). By 2030, it is predicted that Africa will have 310 GW of renewable energy capacity, placing it at the forefront of the world's renewable energy production. Given the extent of Africa's renewable energy resources, green hydrogen offers a chance for the continent to not only decarbonize its energy consumption but enable global access to clean energy by exporting it.
South Africa and Namibia are paving the path to becoming the first green hydrogen exporters from Africa. In October 2021, the South African government and Sasol, the country's largest fuel producer, officially agreed to conduct feasibility studies for a green hydrogen project in the Northern Cape province. Following that, the government unveiled its Hydrogen Society Roadmap, which outlines proposed projects and South Africa's goal to become a major exporter of hydrogen fuel to countries that have high demands — particularly Germany, Japan, South Korea, and China.
Similarly, in November 2021, Namibia announced the opening of a tender for a renewable energy project in Tsau-Khaeb National Park that would support the creation of green hydrogen. If it is successful, the $9.4 billion project could theoretically create 300,000 tons of fuel, establishing Namibia as a major center for the export of green hydrogen.
To successfully explore hydrogen production, Africa has to form strategic partnerships in two key areas: financing and technical support from viable off-takers; and establishing a regulatory framework (while still in the exploratory stage) that will support hydrogen production and export.
Germany, which wants to lead the world in clean hydrogen economies by 2045, is providing financial and technical support to both South Africa and Namibia. Germany has also selected major oil and gas producers, Angola and Nigeria, as possible hydrogen production hubs in recognition of the sector's potential in the region and how it may assist its own net-zero ambitions.
Along with Africa, Germany has also set sights on Gulf countries — the UAE, Qatar, and Saudi Arabia — to secure hydrogen supply. This came after Germany was compelled to put its major hydrogen production development plans with Russia and Ukraine on standby.
The challenge in these endeavors is the fact that green hydrogen production is expensive. But experts believe the economic viability of green hydrogen will increase by lowering the cost of electricity, which accounts for 80% of the cost of operations. The Gulf countries are cash rich and among the world’s cheapest producers of solar energy, providing them a competitive advantage in the production of green hydrogen. Furthermore, their strategic location at a logistical crossroads between Africa, Europe, and Asia allows them to serve a broad market, and they are well-versed in the mechanics of moving combustible products like natural gas. However, in the case of African countries, policymakers must consider the economic feasibility of hydrogen exports, given that green hydrogen is not yet widely in demand and has high manufacturing and supply chain costs.
A Strategic Gulf-Africa Alliance
To meet its goal to switch entirely to green hydrogen by 2050, the European Union has stated that it will need to acquire 10 million tons of green hydrogen annually, with imports from Africa and other countries playing a major role. While offering financial and technical solutions, Germany is driving the conversation in Africa as the off-taker. And yet a strategic partnership with the Gulf may aid African nations with the establishment of a regulatory framework, as both these regions have a common goal to become exporters of hydrogen fuel.
The Gulf region has come to understand the importance of hydrogen fuel for the future of the energy industry. A few Gulf countries, such as the UAE, Saudi Arabia, and Qatar, are emerging as market leaders in the exploration, production, and export of hydrogen. These countries also have the necessary financial resources, business climate, and logistical infrastructure to support production. Additionally, because they export gas and oil, they already have the infrastructure required to transport hydrogen. Last but not least, they have the drive to continue leading the clean energy charge since they aspire to become the world's energy superpower and have several hydrogen-focused R&D programs to that effect. Therefore, a ‘Gulf-Africa hydrogen strategic alliance’ can support African countries by shortening the learning curve and facilitating the development of infrastructure to produce and export hydrogen within the next decade.
The Gulf region is already heavily embedded in the African renewable energy space. The UAE launched the "Etihad 7" program that will secure funding for green initiatives on the African continent seeking to provide clean power to 100 million people by 2035. Saudi Arabia has also introduced renewable energy initiatives through Acwa Power in North and South Africa. By forming the ‘Gulf-Africa hydrogen strategic alliance’, the Gulf can secure a stake in hydrogen export revenues while supporting African countries to develop the needed R&D technologies and building the right infrastructure to integrate into the hydrogen economy within the next decade. The Gulf countries have also strategically increased their investments in the continent's transportation and logistics infrastructure. By leveraging their already-existing resources on the African continent, they can further cash in on the supply chain flows expected from hydrogen demand and work together with African countries to help integrate the latter more deeply into global supply chains through Gulf hubs.
Naam Chakravorty is a Gulf Analyst at Botho Emerging Markets Group